Cross border business angel investments in CEE regions

The 4NGELS project, a collaborative effort among leading business angel networks in Central and Eastern Europe, recently conducted a survey to delve into the perspectives of CEE business angels on cross-border investing. The results yielded intriguing insights. Key findings suggest that investor training programs, integral to the 4NGELS initiative, could effectively address concerns surrounding international investments and mitigate risks arising from a lack of knowledge.

One noteworthy revelation is the potential benefit of investing abroad. By participating in such ventures, investors not only enhance portfolio diversification but also gain access to a plethora of intriguing projects. The experience itself is deemed valuable, providing a unique and enriching dimension to their investment portfolios.

In a testament to the increasing globalization of angel investing, a significant 50% of those surveyed affirmed their involvement in startups beyond the borders of their home country. This underscores a growing trend among CEE business angels to explore opportunities and contribute to the thriving startup ecosystems beyond their primary residence. As the 4NGELS project continues to bridge gaps and offer training, it stands poised to empower investors, fostering a more dynamic and interconnected angel investment landscape across the region.

From those who have invested in startups abroad. Exploring the reasons behind investors’ choices in specific countries, the survey delved into various factors influencing their decision- making process:

Knowledge about Local Business Culture (20.0%): A notable percentage of investors emphasized the importance of understanding the intricacies of the local business culture. This suggests a recognition that familiarity with the cultural nuances of a region can significantly impact the success and integration of investments.

Trusted Connections with Local Investors (48.89%): The overwhelming majority of respondents, nearly half, cited the presence of trusted connections with local investors as a pivotal factor. This highlights the significance of networking and establishing reliable relationships within the local investment community for successful cross-border ventures.

Connections in the Local Ecosystem (20.0%): A portion of investors expressed the importance of having established connections within the local entrepreneurial ecosystem. This underlines the value of being ingrained in the local network, providing insights and opportunities that might not be immediately apparent from an external perspective.

Specific Startup Attraction (55.56%): A significant majority, over half, indicated that the primary reason for investing in a particular country was the presence of a startup they were keen on. This reaffirms the central role that the appeal and potential of specific startups play in guiding investment decisions.

Other Reasons (13.33%): A smaller percentage mentioned additional factors influencing their choices. These could encompass a range of considerations, from regulatory environment to geopolitical stability, emphasizing the multifaceted nature of investment decision-making.

Additionally, the survey shed light on the distribution of investments, revealing that 56% of investors that decided to conduct cross border investments concentrated their endeavors on just 1-2 startups. This nuanced insight suggests a cautious yet strategic approach among business angels, emphasizing a preference for a measured entry into foreign markets. Such conservative investment behavior may stem from a desire to mitigate potential risks associated with unfamiliar territories while still reaping the benefits of diversification and accessing promising projects.

As the 4NGELS project recognizes these patterns, it underscores the significance of tailoring investor training programs to address specific concerns and knowledge gaps prevalent among business angels in the region. By offering targeted guidance and insights, the initiative aims to not only encourage but also empower investors to explore cross border opportunities more confidently. Ultimately, this collective effort seeks to bolster the international dimension of angel investing, fostering a collaborative and informed ecosystem that transcends geographical boundaries. Below there are the most common problems investors have with entering foreign markets. Most of these issues can be solved through the 4NGELS Investor training sessions.

Lack of Knowledge about Foreign Markets (30.56%): A significant percentage expressed hesitancy due to a lack of knowledge about foreign markets. This underscores the importance of comprehensive training programs to equip investors with the necessary insights and understanding to navigate unfamiliar territories.

Absence of Connections with Investors from Abroad (50.0%): Half of the respondents identified a lack of connections with foreign investors as a deterrent. Establishing international networks is crucial, and the 4NGELS project, through its investor training program, is well-positioned to bridge this gap by fostering cross-border connections.

Limited Access to Dealflow (41.67%): A substantial number of investors cited restricted access to deal flow as a hindrance. The 4NGELS project, by offering targeted training, has the potential to enhance investors' deal-sourcing capabilities, facilitating smoother cross-border investments. Additionally as part of the investor training program, interesting startups are shown to the investors with a possibility of syndicate investments between business angels from different countries.

Lack of Interest in Cross-Border Investments (5.56%): A small percentage admitted to a lack of interest in cross-border investments. While a minority, it emphasizes the importance of tailor-made programs to kindle interest and showcase the potential benefits of diversifying investment portfolios globally.

Inexperience and Unreadiness (22.22%): Another significant group highlighted that they are at the initial stages of their investment journey and feel unprepared for cross-border ventures. The 4NGELS project, through its training initiatives, can play a pivotal role in building the confidence and readiness of such investors.

When contemplating the necessary aspects for venturing into cross-border startup investments, the survey respondents shed light on the key prerequisites such as:

Understanding of Local Business Culture (60.0%): A majority of investors highlighted the importance of grasping the intricacies of local business culture. This underscores the need for a comprehensive understanding of the cultural nuances that can significantly impact the success of foreign investments.

Market Analysis (48.57%): Nearly half of the respondents emphasized the significance of thorough market analysis. A comprehensive understanding of the market dynamics in a foreign country is crucial for making informed investment decisions and navigating potential challenges.

Law & Tax Knowledge (48.57%): An equal percentage identified the need for a strong foundation in law and tax knowledge. Navigating the legal and tax landscapes of foreign markets is vital to ensure compliance and mitigate risks associated with unfamiliar regulatory environments.

Connections with Local Ecosystem Stakeholders (62.86%): A substantial majority underscored the importance of establishing connections with local ecosystem stakeholders. Building relationships with key players within the foreign entrepreneurial ecosystem can provide invaluable insights and opportunities for successful cross-border investments.

Personal Contacts with Local Angel Investors (65.71%): The highest percentage emphasized the paramount importance of personal contacts with local angel investors. This highlights the critical role of networking and relationship-building in fostering successful cross-border investment endeavors.

These insights paint a clear picture of the multifaceted skill set and networking capabilities required for investors to embark on successful cross-border startup investments. The 4NGELS project, with its tailored investor training program, is well-poised to address these needs, providing investors with the essential tools and knowledge to navigate the complexities of international investment landscapes. By focusing on these key aspects, the initiative aims to empower investors and contribute to the growth of cross-border investment activities in the Central and Eastern European region.

We extend a warm invitation to both investors and startups to explore the opportunities presented by the Slovenian batch of the 4NGELS program. Embrace the chance to be part of a dynamic and interconnected ecosystem, where knowledge, connections, and experiences converge to shape the future of angel investing in Central and Eastern Europe. Join us on this journey of growth, collaboration, and success by visiting 4NGELS Program. Your participation will not only enrich your own venture but contribute to the thriving landscape of cross-border investments in the region.

Kamil Ługowski,
COBIN Angels
Learn more about the 4NGELS Program: cobinangels.com/4ngels

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